Mish just posted a really interesting article detailing the social pressure which prevents people from walking away. It is interesting that “society” claims that homeowners need to act “morally” and keep their “promise to pay” above and beyonds of the term of the contract that they signed, but “society” makes no such claims on the lenders.
Everyone must walk away. Seriously. It’s the only way the excess debt will get flushed out of the system and the economy can recover. Walk away, default the excess debt, and then rebuild. Otherwise we will just drag on forever and have multiple lost decades, like Japan.
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